Taiwan unveils measures to lift stock market

PUBLISHED : Tuesday, 09 September, 2008, 12:00am
UPDATED : Tuesday, 09 September, 2008, 12:00am
 

Taiwan has unveiled a series of measures to try to prop up the island's ailing stock market.

The bourse has shed 30 per cent of its value since Ma Ying-jeou's government took office on May 20, shaking the public's faith in the new administration.

In addition to planned measures to lower the capital adequacy ratio for financial holdings firms to 105 per cent from 110 per cent, authorities would review plans to cut stock transaction and other taxes to shore up the market, Taiwanese Vice-Premier Paul Chiu Cheng-hsiung said.

He said the cabinet was pushing ahead with tax reforms, including reducing inheritance tax and corporate and individual income tax rates.

'The government is taking all factors into consideration, and may probably make a decision by Thursday,' he said in Taipei.

Earlier yesterday, Finance Minister Li Sush-der said his ministry was 'working towards the direction' of lowering the stock transaction tax, in addition to reducing the commodity tax, customs tariffs and business tax - measures expected to cost the government NT$20 billion (HK$4.9 billion) in revenue. He declined to say what the reduced rate of the stock transaction tax would be, only saying the cabinet was expected to make an announcement at its weekly meeting on Thursday.

Taiwan last reduced the stock transaction tax in 1993, from 0.6 per cent to 0.3 per cent. Local firms and investors have repeatedly called for the rate to be halved to 0.15 per cent.

On Sunday, the Financial Supervisory Commission announced five measures in an attempt to boost local stocks, including cutting the capital adequacy ratio for financial holdings firms to encourage them to buy back more of their own shares in a market downturn. The reduction of the ratio would increase the number of such firms eligible to buy back their own shares from five to 12.

Other measures include setting up an ad hoc committee to push blue chips listed on the local market, and encouraging securities investment and trust companies to issue stock-based mutual funds for investment on the local market.

These measures, plus yesterday's disclosures, triggered a 5.6 per cent, or 352-point, rebound in the Taiwanese index, which dipped to a two-year low last week of about 6,300 points.

Since last week, the Ma government has been the subject of intense criticism by the opposition for failing to improve the economy and lift the ever-falling stock index, long considered a political barometer to gauge public confidence in the government.

Since May 20, the index has fallen by about 2,500 points, or 30 per cent.

Mr Ma had promised that if elected he would bring in his so-called '633' stimulus - an annual economic growth rate of 6 per cent, a jobless rate under 3 per cent and annual per capita income of US$30,000.

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